How India’s Defence Sector is Powering Global Ambitions

The recent escalations along the India-Pakistan border have once again thrust India’s defence preparedness into the national spotlight. A series of border skirmishes with Pakistan demonstrated India’s significantly enhanced defensive capabilities, with the Indian Armed Forces deploying advanced indigenous weapons systems that effectively neutralised threats while minimising civilian casualties.

What stood out in these confrontations wasn’t just the tactical response but the technological sophistication of India’s military equipment. The use of made-in-India surveillance drones, precision guided munitions, and advanced electronic warfare tools shows how much India’s defence industry has grown and how it now relies less on foreign imports.

A simple India vs Pakistan google trends search shows us the heightened brouhaha around the two nations in the last 30 days. 

Looking Back: India’s Defence Landscape a Decade Ago

To fully appreciate the transformation, we must understand where India’s defence sector stood just a decade ago. In 2015, India was the world’s largest arms importer, accounting for approximately 14% of global arms imports. The country’s defence production was primarily focused on assembly and licensed manufacturing of foreign-designed equipment, with limited indigenous design capabilities. 

The production volume of major defence public sector undertakings (DPSUs) like Hindustan Aeronautics Ltd. (HAL), Bharat Electronics (BEL), and Mazagon Dock Shipbuilders was considerably lower than current levels. For instance, HAL’s annual production value in 2014-15 was approximately ₹15,900 crore (roughly $2.3 billion at the time), with a heavy reliance on foreign components.

Defence exports were particularly anaemic in 2013-14, standing roughly at about ~₹686 crores ($113 million). Most exports consisted of basic components and relatively simple systems sold primarily to smaller nations in Southeast Asia and Africa. India’s global footprint as a defence exporter was minimal, with the country struggling to meet even its domestic requirements.

The ecosystem for private sector participation was still in its infancy. Defence production was dominated by nine DPSUs and 41 Ordnance Factories, with private players largely confined to the role of component suppliers rather than full-system integrators.

Current Scenario: A Transformed Order Book and Production Capabilities

Fast forward to the present, and the transformation is nothing short of revolutionary. India’s defence exports touched a record-breaking ₹23,622 crore in FY 2024-25, a staggering 34-fold increase in just over a decade. This remarkable growth is a testament to the ‘Atmanirbhar Bharat’ (Self-Reliant India) initiative and the ‘Make in India’ policy push. Indigenous defence production reached a record ₹1.27 lakh crore in FY 2023-24, a 174% increase from ₹46,429 crore in 2014-15. Indian defence equipment is now exported to over 85 countries, including advanced systems to nations in Europe, Southeast Asia, and the Middle East.

India’s defence production has more than tripled, with the annual turnover of domestic defence companies exceeding ₹1.35 lakh crore. The order books of major defence manufacturers are at historic highs and so has the defence budget of the country. Take a look at the growth in the budget allocation.

The private sector’s participation has expanded dramatically, as they have emerged as significant players, securing substantial contracts for artillery systems, tactical vehicles, and unmanned aerial vehicles. The defence corridors established in Uttar Pradesh and Tamil Nadu have become hubs of innovation, hosting hundreds of MSMEs that form a robust supply chain.

Indigenous Technology: Proving Its Mettle

The recent India-Pakistan conflict, particularly “Operation Sindoor,” showcased the strength and efficiency of India’s indigenously developed defence technologies. The Indian Air Force successfully bypassed and jammed Pakistan’s Chinese-supplied air defence systems, completing its mission in just 23 minutes. Post that the ensuing retaliatory escalations, which lasted for 3-4 days before the ceasefire, also witnessed some indigenous developed warfare instruments, some of which as mentioned below. The operation highlighted the effectiveness of India’s sophisticated air defence, drone warfare, and electronic warfare systems.

Key indigenous technologies utilised included:

• Akash and Astra Missile Systems: India’s domestically developed surface-to-air and air-to-air missiles provided effective area denial capabilities. The Akash system intercepted multiple aerial threats, while Astra beyond-visual-range missiles gave Indian fighter jets a decisive edge in air combat scenarios.
  
• BrahMos Cruise Missiles: The supersonic cruise missiles, developed through Indo-Russian collaboration but increasingly indigenized, served as a critical deterrent with their precision strike capabilities against both land and sea targets.
  
• RUSTOM-II Drones: These medium-altitude long-endurance unmanned aerial vehicles provided crucial intelligence, surveillance, and reconnaissance capabilities, enabling effective battlefield awareness and target acquisition.
  
• Electronic Warfare Systems: Indigenously developed by the Defence Research and Development Organisation (DRDO) and manufactured by BEL, these systems successfully jammed enemy communications and radar systems during the confrontations.
  
• Arjun Mk-1a Main Battle Tanks: The advanced version of India’s indigenous main battle tank demonstrated superior mobility and firepower in challenging terrain conditions.

These technologies represent a blend of indigenous development and strategic international collaborations. While some systems like the BrahMos originated from partnerships with countries like Russia, India has gradually increased the indigenous content in these platforms. Other systems like the Tejas and Akash are predominantly indigenous developments, with domestic content exceeding 75%.

The path to these capabilities hasn’t been straightforward. India has strategically leveraged technology transfer agreements from partners like Russia, France, Israel, and the United States, while simultaneously investing in domestic R&D through DRDO and various academic institutions. This dual approach has enabled India to gradually reduce dependence on foreign OEMs while building sovereign capabilities in critical technologies.

Market Soars on Defence Capabilities

Since the start of the year, the Nifty India Defence Index has returned ~18% versus Nifty 500’s ~1% returns. The performance of the Defence Index can very clearly be broken into two parts. From Jan till March, the index saw heavy selling amidst market sell off. However, things turned around rather quickly, as the index reversed all its losses.

From Jan 1 to Mar 17, the index was down ~13%. Howeve, from Mar 18 to May 14, the index was up ~33%. That’s the kind of recovery we have gotten to witness in this index. Needless to say, the border skirmishes with Pakistan acted as a catalyst for the sector.

The Way Forward: A Strategic Imperative and Global Footprint

Looking ahead, India’s defence sector is poised for further transformation. The government has set an ambitious target of achieving ₹35,000 crore ($4.3 billion) in defence exports by 2027-28, supported by a streamlined export approval process and lines of credit for friendly foreign countries.

Several key developments are expected to shape the sector’s future:

1. Advanced Weapons Development: Projects like the indigenous fifth-generation Advanced Medium Combat Aircraft (AMCA), hypersonic weapons, and quantum communication systems are in advanced stages of development and will form the next generation of India’s defence capabilities.
   
2. Public-Private Partnerships: The government continues to encourage collaborations between DPSUs and private players, creating a more resilient and innovative defence industrial base.
   
3. Self-Reliance in Critical Technologies: A focused approach on developing indigenous capabilities in semiconductor manufacturing, advanced materials, and artificial intelligence will reduce vulnerability to global supply chain disruptions.
   
4. Export-Oriented Manufacturing: With a proven track record of delivering cost-effective solutions, Indian defence manufacturers are positioning themselves as reliable alternatives to traditional suppliers for emerging markets in Africa, Southeast Asia, and Latin America.

The broader impact on India’s economy and geopolitical standing is significant. The defence sector is increasingly becoming a catalyst for high-skilled job creation, with over 500,000 direct and indirect jobs attributed to the defence manufacturing ecosystem. The technology spillovers from defence R&D are benefiting adjacent sectors like aerospace, electronics, and advanced materials.

Geopolitically, India’s enhanced defence capabilities and reduced dependence on imports strengthen its strategic autonomy in a complex regional environment. The ability to indigenously develop and produce advanced weapons systems gives India greater leverage in international relations while reducing vulnerability to sanctions or supply restrictions.

As India continues this transformative journey, the defence sector represents not just a security imperative but a critical component of the nation’s economic and technological advancement. The recent border tensions, while unfortunate, have served to validate the strategic investments made over the past decade in building a robust, self-reliant defence industrial base.

From being the world’s largest arms importer to an emerging exporter of sophisticated defence systems, India’s progress reflects a significant shift in the global defence landscape. As this trajectory continues, India is poised to join the ranks of nations with comprehensive defence manufacturing capabilities, enhancing both its security and its global influence.

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